“Access-Orders”: Explaining the Italian Regional Divide
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QUADERNI DEL DIPARTIMENTO DI ECONOMIA POLITICA E STATISTICA Paolo Di Martino Emanuele Felice Michelangelo Vasta The curious case of the coexistence of two “access-orders”: Explaining the Italian regional divide n. 758 – Luglio 2017 The curious case of the coexistence of two “access-orders”: Explaining the Italian regional divide Paolo Di Martino (Birmingham Business School, UK) Emanuele Felice (University of Chieti-Pescara, Italy) Michelangelo Vasta (University of Siena, Italy) Abstract: This paper uses the conceptual categories of Open Access Order (OAO) and Limited Access Order (LAO) developed by North, Wallis and Weingast (2009) to explain the origins and persistence of Italian North- South economic divide since the country unification in 1861. We argue that, despite the existence of the same set of formal institutions, historically the North of the country progressively developed into an OAO, while in the South only an “horizontal” transition took place whereby it remained a LAO, with aristocratic privileges being substituted by rents allocated to lobbies and political clienteles. Using original data on crime and participation to elections and referendums, we show that this evolution was the result of the failure of the State, in the South, to acquire the monopoly over the legitimate use of violence and to operate as an efficient and credible coordination mechanism. With the support of data on education and female labour participation, we claim that this led to a much more unequal access to resources and opportunities, leading to a gap in income per capita which persisted over time and it is still visible today being unparalleled in the Western world. JEL codes: O17, O43, N14, N94 We thank Sara Pecchioli for precious research assistance. We are also grateful to Luigi Guiso and Paolo Pinotti, for sharing their data with us. A previous version of this paper was presented at the workshops Violence, the Evolution of Social Orders and Transnational Relations (4-5 December 2015, Munich, Germany), La società italiana e le grandi crisi economiche 1929-2016 (25-26 November 2016, Rome, Italy) and c.MET05 Politiche per il cambiamento (dell’industria, dell’economia e della società) (8-9 June 2017 Ferrara, Italy); the authors thank the attendants to the seminars for comments and criticism. Usual caveat applies. July, 2017 1. Introduction Nowadays, Southern Italy represents the largest backward area of Western Europe. With a population twice the size of Greece, it still has most of its regions (Campania, Apulia, Basilicata, Calabria, Sicily) fully eligible for the European 2014-2020 structural funds; in these regions GDP per head is below 75% of the EU-27 average (at PPP) while in the rest of the South (Abruzzi, Molise, Sardinia) hovers between 75 and 90%.1 Inside the European Union, to find such large underdeveloped areas we must look at Eastern countries, with an obvious, different institutional and historical legacy; but even those regions are now moving fast, unlike the Italian Mezzogiorno. The explanation of the historical origin, the depth, and long-term persistency of regional divide in Italy is part of extremely controversial and so-far unresolved academic debates. In fact, the backwardness of South and islands (in light grey and white in Figure 1 below) as compared to the North-West, North-East and centre of the country (in darker grey) is also a huge political problem, with the so-called questione meridionale often put, at least on paper, at the centre of the policy and the political disputes. Figure 1. Italy’s regions and macro-areas Source: Felice and Vasta (2015, 50). Notes: our estimates are at the historical borders; Molise was created in 1963 from Abruzzi’s Southernmost part, to have uniformity in the long run it was not reported. Trentino-Alto Adige and Friuli were assigned to Italy after WWI (the latter included Istria, lost after WWII). 1 See the map in the European Commission website, http://ec.europa.eu/regional_policy/sources/what/future/img/eligibility20142020.pdf. 2 In looking at these debates (both academic and policy-oriented), however, the impression that one gets is of a certain degree of not just pessimism but fatalism too, as if we should now simply accept the idea that the problem will never be solved. In part this feeling is the product of the established views on the historical causes of regional divide in Italy which, for different reasons, can hardly generate strong policy responses. Although summarising a long and divisive debate is beyond the remits of this paper, it is fair to say that two broad explanations of the regional divide have been provided. The first one – that we can label the “exploitation” view – suggests that the South of the country has been directly, and/or indirectly, the victim of the North (Capecelatro and Carlo 1972). The implication of this view is that, de facto, the South has no problem that can be corrected via national policy and, to the extreme, the only thing to do would be mere financial compensation. The second view points towards natural limitations in the ability of the South to develop, being them geographic and resource-endowment related (Cafagna 1961, A’Hearn and Venables 2013) or linked to some long-term cultural traits that make the Southerners the architects of their own misfortune (Banfield 1958). Although this second view can be further divided between arguments that absolve the Southerners and arguments that condemn them, nonetheless the implication is that no policy can change things. The failure of the above interpretations on the one hand to fully make sense of the backwardness of the South and, on the other, to propose effective policy, paved the way to efforts to provide an alternative view. Recently this has emerged, based on North’s concepts of institutions, defined as the “rules of the game” of the economy. In a recent book by Felice (2013), and in a subsequent paper by Felice and Vasta (2015), it has been argued that the cause of economic backwardness of the South is that Southern élites consistently promoted institutions that guaranteed their privileges at the expenses of the welfare of the population. This took place firstly before unification, but also later when the process of industrialization had already started. It continued in the interwar period and during the golden age, the so called Italian “economic miracle”, although political repression first and massive state intervention later partially mitigated the impact of the problem, and exploded again in the last four decades. In the last few years North’s analysis has moved forward. In their 2009 book, North, Wallis and Weingast (from now on NWW) expand North’s institutions-based view of economic change (and growth) (North 1990, 2005) offering the new conceptual categories of “Access Orders”. The authors distinguish between Open Access Order (OAO) and Limited Access Order (LAO). In the former, the economic and political opportunities are the same to each individual, creating sound competition that maximises economic and political welfare. In the latter, to different extents depending on the specific type of access order, they are not: some 3 groups have exclusive control over the access to some resources, leading to rents and slowing- down the process of economic growth. The aim of this paper is to deepen, reinforce and further conceptualise the institutions- based view of the North-South divide, arguing that this was the result of the unusual co- existence of two different access orders in different areas of the country: OAO in the North and LAO in the South. In so doing the paper provides a twofold result: at one hand a deeper analysis of the Italian case and, on the other, a challenge to the theory, as this seems to exclude the possibility that, under the same set of formal institutions, different access orders can exist. The paper is organised as follows. Section 2 describes the conceptual framework. Sections 3 and 4 provide the evidence that in Italy two different access orders developed over time in the North and in the South; specifically Section 3 analyses the different degrees of the state political “legitimacy”, its control over the legitimate use of violence, and the “impersonality” of economic and political interaction in various areas of the country, while Section 4 provides evidence of how, depending on these elements, access to economic, social, and political opportunities differed, and still differ, in the North and the South. Section 5 combines this evidence into a historical explanation of the North-South economic divide over the last 150 years, while Section 6 concludes. 2. Conceptual framework The degree of control by state authority over the legitimate use of violence is the pivotal element of the NWW conceptual framework. A state which cannot fully control it, faces the competition (actual or potential) from other groups which can demand privileged opportunities and/or preferential access to some resources in return to the promise of not using violence against the state itself. This way, the state creates what is defined a LAO, in which access to opportunities is not the same to all political and/or economic agents. The establishment of rents or quasi-rents that follows represents, for the authors, the main cause of economic backwardness. At the opposite side of the spectrum, a state which has a solid and full control over the use of violence is in the position of establishing an OAO to political and economic opportunities, fostering competition and, in this way, economic and political development. State monopoly over the legitimate use of violence represents, therefore, the necessary yet not sufficient condition for the establishment of a full OAO. In order to achieve this result, the state must also be able to provide a set of “rules of the game” (or “institutions” in North’s jargon) 4 able to support economic growth, the types of institutions that Acemoglu and Robinson (2012, 74–81) define “inclusive” as compared to “extractive”.